Rents, Technical Change, and Risk Premia Accounting for Secular Trends in Interest Rates, Returns on Capital, Earning Yields, and Factor Shares
American Economic Review
vol. 107,
no. 5, May 2017
(pp. 614-20)
Abstract
The secular decline in safe interest rates since the early 1980s has been the subject of considerable attention. In this short paper, we argue that it is important to consider the evolution of safe real rates in conjunction with three other first-order macroeconomic stylized facts: the relative constancy of the real return to productive capital, the decline in the labor share, and the decline and subsequent stabilization of the earnings yield. Through the lens of a simple accounting framework, these four facts offer suggestive insights into the economic forces that might be at work.Citation
Caballero, Ricardo J., Emmanuel Farhi, and Pierre-Olivier Gourinchas. 2017. "Rents, Technical Change, and Risk Premia Accounting for Secular Trends in Interest Rates, Returns on Capital, Earning Yields, and Factor Shares." American Economic Review, 107 (5): 614-20. DOI: 10.1257/aer.p20171036Additional Materials
JEL Classification
- D25 Intertemporal Firm Choice, Investment, Capacity, and Financing
- E22 Investment; Capital; Intangible Capital; Capacity
- E25 Aggregate Factor Income Distribution
- E43 Interest Rates: Determination, Term Structure, and Effects
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity